Supply Chain Optimisation

Guideline on the Effectiveness of Food

Procurement

Import Parity Form & other factors determining the decision to procure either, Locally,
Regionally or Internationally to maximize utilisation of Funds

September 2018
Contents

Introduction 3

1. Import Parity 3

1.1.1 Import Parity Form (IPF) 4

1.2 Commodity prices 4

1.3 Ocean transport costs and other related costs 5

1.4 Land transportation costs 5

1.5 Quality and Quantity costs 5

2. Other Considerations 5

2.1 Impact on the local/regional market 6

2.2 Ways to maximise utilisation of funds 6

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 Introduction
The effectiveness of a procurement action is determined by various factors including, cost-
efficiency, timeliness of delivery, appropriateness of the commodity to meet the dietary
needs of beneficiaries, impact on the local/regional markets, donor/country specific
restrictions, and other considerations specific to the operation for which the commodities
are procured.

The WFP food procurement mission statement is “to ensure that appropriate food
commodities are available to WFP beneficiaries in a timely and cost-effective manner”.

The IPF’s purpose is to decide whether the commodities will be purchased locally, regionally
or internationally, depending on the Import Parity Price.

This document is to be used in conjunction with the: “Requested Time of Arrival (RTA)
guidance note dated July 2018, http://newgo.wfp.org/documents/requested-time-of-
arrival-rta-guidance-note.

The following sections defines the main factors to be considered when programming food
procurement:

1. Import Parity
2. Other Factors

1. Import Parity
To ensure cost-efficiency the prices of the local or regional markets must be compared with
those available on international markets. Procuring locally will be cost-efficient only if the
local price is below the FOB International price once the sea transportation, port & handling
charges, inland transport and any other associated costs have been added to the FOB price.
Import Parity is the cost of supplying food commodities locally, regionally or internationally
to the same named delivery place in the recipient country.

The calculation of Import Parity Prices (IPP) involves three stages of the programming
process. During the life cycle of a project, commodity costs and shipping rates need to be
estimated to make/propose decisions on the procurement type (local, regional or
international), i.e.
- for budget purposes
- for funding proposals for donors
- for confirmed contributions, to create Purchase Requisitions (PRs)

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1.1.1 Import Parity Form (IPF)
The cycle of the food procurement process commences with the creation of an Import Parity
Form (IPF) in the Supply Chain Import Parity System (SCIPS) by the RB/CO programming unit
in collaboration with the RB/CO procurement and shipping/logistics units. SCIPS is a real-
time web- based system allowing Regional Bureaux/Country Offices to have an effective cost
and lead time comparison for the various sourcing options (international/regional and local
markets). This enables the RB/COs to decide the best procurement origin/option for the
commodities. It combines food prices, transport, other associated costs and lead time
information enabling faster processing and the possibility to track the status of the IPFs.

The IPF must compare prices from all feasible origins (including associated costs of moving
the commodities either by sea and/or overland), to the same delivery place. The IPF
automatically displays the minimum and the most cost-effective option (considering the
RTA). If the IPF Originator recommends purchasing from a source where the cost is higher
than the total lowest value (Above IPP), the system will advise on the total extra cost. In
order to maximise the utilisation of funds, the decision on where to buy the food must be
taken in consultation with the Procurement Unit, Logistics Unit in the RB/CO, and the Ocean
Transport Unit in HQ, and if necessary the HQ Food Procurement Unit can be consulted.
E- training guide Create an Import Parity Form
E-training guide Approve reject an Import Parity Form
Please refer also to the Local/regional Import Parity Procurement Process

For all International and GCMF IPFs, the IPFs are sent directly through SCIPS to the
Commodity Experts in HQ/RBs, who will approve/reject the IPFs. After the IPF is approved
the SCIPS system automatically advises the IPF Originator.

Only upon approval of the procurement type and relevant rates, can the RB/CO
Programming unit proceed with the Assignment Plan (AP), which is then submitted to the
HQ Programming Unit for the creation of the Purchase Requisition (PR) in WINGS.

1.2 Commodity prices

A commodity can be purchased on the International, Regional or Local markets. Before a
decision can be made on where to procure a comprehensive comparison must be made.

International Commodity prices are integrated in the SCIPS data base and updated regularly.
If the prices are not available in SCIPS, the IPF originator can request the international price
from HQ Food Procurement, and the local/regional prices from the RB/CO Food Procurement
Units. Prices can be inserted manually into the IPF by the originator. Prices in SCIPS, are
expressed in US$, per net Metric Tons (MTs), and must indicate the delivery terms (FOB, FCA,
CFR, DAP), and the named place/port of delivery/shipment. Please refer to creating IPFs:
E- training guide Create an Import Parity Form

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1.3 Ocean transport costs and other related costs
Ocean transport prices are integrated in the SCIPS data base and are maintained by the
Ocean transport unit. If the required price is not available in SCIPS, an email can be sent to
the HQ Shipping Unit requesting the relevant price.
Port, Handling charges and other associated costs must be inserted manually into the IPF.

1.4 Land transportation costs

Where a commodity is purchased on the international market to a port in a different country
or regionally, an overland transport rate to the final destination country must be applied.
Land transportation costs must be obtained from the RB/CO Head of Supply Chain or the
relevant logistics unit.

1.5 Quality and Quantity costs

A quality and quantity survey is conducted before taking possession of the food
commodities, and a superintendence survey is undertaken when offloading the food
commodities from the carrier. The estimated costs for these inspection services must be
included in the IPF for inclusion on the Assignment Plan.

2. Other Considerations
The decision to proceed with local, regional or international procurement can be influenced
by other factors, e.g. ability to meet the RTA date, minimum ordering quantity, availability,
donor requirements, etc.

• Donor, Import-Export restrictions

Donor and Import/Export restrictions may necessitate procurement from specific
countries and may not be the most cost-effective option. When entering the Grant into
the IPF the donor and import/export restrictions must be viewed. In the case where
donors require food to be purchased locally, please keep in mind that local food means
locally produced food and must be bought in the country for the country.

• Requested Time of Arrival (RTA)

In many operations, concerns about the RTA at final destination may override
consideration concerning the lower cost. RB/COs must justify the decision to purchase at
a less cost-effective price by attaching all pertinent information to the IPF.
Lead times for international, regional and local purchases should be compared. Lead
times can be obtained from RB/CO Procurement/Pipeline/Logistics Officers.
Please also refer to: http://newgo.wfp.org/documents/requested-time-of-arrival-rta-
guidance-note

• Minimum ordering quantities

• When determining the amount of a food commodity one should bear in mind that,
purchasing a minimum quantity could be impossible or extremely cost-inefficient to

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 purchase the food with an ad-hoc tender, e.g. when the quantity is less than a
container/truck load.
• In the case of International/Regional procurement, if CO does not achieve the
minimum quantity, the HQ/RB Food Procurement Units can put PR’s on hold,
awaiting similar PR’s, to obtain the minimum quantity required for a tender. In the
COs, some minimum quantities might apply, and these must be taken into
consideration when creating the IPF.

2.1 Impact on the local/regional market

Market assessments must be undertaken to ascertain whether local procurement will have
adverse effects on the local markets. WFP should only buy when there is a surplus in the
market and the procurement will not cause a deficit in the country.
http://foodprocurement.manuals.wfp.org/en/4sourcing/42market-research/

2.2 Ways to maximise utilisation of funds

RB/COs should ensure proper timing of cash resources/issuance of PRs to avoid purchasing
in the lean seasons, and to avoid potential pipeline breaks which could lead to procuring
food at higher prices. IPFs should be done in co-ordination with the
Procurement/Logistics/Pipeline/Programming units to ensure that all relevant market
related information is available. Delivered prices from different origins must be compared
to facilitate the decision on whether to procure on the international/regional/local market.
PRs must be available at the time of purchase.

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